Stefon Walters, The Motley Fool

Sun, Jun 22, 2025, 3:56 AM5 min read

• Investing in the S&P 500 offers instant diversification, exposure to blue chip stocks, and proven historical results.

• The Vanguard S&P 500 ETF is one of the cheapest exchange-traded funds on the stock market.

• They're not directly correlated, but the S&P 500's performance is used as a broad gauge of the U.S. economy.

• 10 stocks we like better than Vanguard S&P 500 ETF ›

One of the biggest misconceptions about investing is the amount of effort and time required to do it successfully. In some cases, it pays to dedicate a lot of time and energy to selecting the right stocks. However, for most people, this isn't necessary, and good returns can be accomplished via exchange-traded funds (ETFs).

Investing in ETFs allows investors to achieve instant diversification in many cases, removes much of the guesswork from investing, and reduces the risk associated with investing in individual stocks. No need to listen to earnings calls, read financial statements, or tune into every headline. Simply invest in the ETF and let multiple companies do the work.

There are thousands of ETFs on the stock market, but there's one ETF in particular that I'd invest $1,000 (or any amount) in without thinking twice: The Vanguard S&P 500 ETF (NYSEMKT: VOO).

The Vanguard S&P 500 ETF mirrors the S&P 500 (SNPINDEX: ^GSPC) index, which tracks the 500 largest American companies on the stock market.

The S&P 500 and the U.S. economy aren't directly tied, but the size and importance of these companies to the U.S. economy make the S&P 500 a broad representation of that economy. According to S&P Global, S&P 500 companies accounted for around 80% of the available U.S. market cap.

There are multiple S&P 500 ETFs to choose from, but I prefer the Vanguard ETF because of its low 0.03% expense ratio. For perspective, the more popular SPDR S&P 500 ETF Trust has an expense ratio that's more than three times higher, at 0.0945%. The difference may seem small, but it could easily add up to hundreds or thousands of dollars over time.

Combine that low cost with instant diversification and exposure to some of the world's top blue chip stocks, and it's a trifecta worth having in your portfolio.

This ETF is weighted by market cap, so larger companies account for more of it than smaller companies. As a result, mega-cap tech stocks ($200 billion or more) and the information technology (tech) sector as a whole make up a larger portion of the ETF than they did in previous years.